Article published by José Alberto León Alonso in El Día on 11/29/15.
Argentina is a disconcerting country. Nobel Prize-winning economist Kuznets illustrated this specificity when he said that there were four types of countries: developed, underdeveloped, Japan and Argentina. Argentina is the only formerly developed country that has managed to get out of this exclusive group due to the blows of Peronist populism that has guaranteed disorganization and misgovernment. In 1904 its per capita income was fourth in the world, above that of Germany and France. In 1950 it had already fallen to eighth place, but in 2014 its per capita income barely amounted to 12,500 dollars, almost a third of that of Spain, and it had fallen to 52nd place in the world.
At first glance, Argentina's economic performance is puzzling, but the reasons for its decline become clear when viewed through the lens of institutional role, as Acemoglu and Robinson do in their book Why Nations Fail. According to the authors, countries grow economically if they are able to create inclusive institutions, and they stagnate or decline if their institutions are exclusive. It is the political conflict and the way it is resolved that determines the path to prosperity or poverty of a society. In his own words, “the key to economic development consists of having inclusive institutions that, economically, guarantee property rights, law and order, the freedom to establish new businesses, the effectiveness of contracts, access to education and equal opportunities for the vast majority of citizens; and, politically, they guarantee participation and pluralism and the imposition of restrictions and controls on the arbitrariness of politicians.”
In 1946, Perón was democratically elected President of Argentina, and shortly thereafter he dismissed four of the five members of the Supreme Court of Argentina, who had rejected a Peronist law as unconstitutional. The weakening of the Court freed Perón from political limits. Thus, he was able to send his main opponent to jail for “lack of respect” for the President. Since then, each Argentine president (democratically elected or not, Peronist or not) elects his own Supreme Court judges. Since the emergence of Perón, power in Argentina hardly found limits, distributing positions, contracts and perks, and breaking the established rules with impudent audacity. If the Supreme Court questioned a policy, the Court was changed. If, as happened in 2007, professional statisticians published high inflation rates, they were replaced with political protégés who published “convenient” statistics, and anyone who questioned the official statistics was threatened with criminal prosecution for spreading false rumors. The recent victory in the Argentine elections of the conservative candidate Mauricio Macri opens the possibility of a new era for his country, as it marks the first time in which Peronism is democratically defeated by the center-right and the third time in the last seventy years that the Peronist “national movement” is defeated in democratic elections.
Acemoglu's book emphasizes that there is no historical predeterminism for nations to develop or fail. On the contrary, there are historical moments that represent a “turning point” depending on whether they are resolved in favor of inclusive or extractive institutions. This could be one of them for Argentina. Just as pressing as the consolidation of a reasonable left in Latin America, away from barely democratic policies and populist leaders like Perón, Chávez or Morales, is the consolidation of a civilized right, like the one that Macri seems to embody in Argentina, that does not access or retain power with coups d'état and that does not behave in a totalitarian manner.
Whether this opportunity materializes or not will depend on many factors, but the new President will find himself with a horrible legacy, yet to be estimated reliably, since no one believes the official statistics. Annual inflation is believed to be the second highest in the world, behind only that of Venezuela, and the country has been left without foreign currency reserves and without access to international credit markets. It can also boast of having put into practice one of those economic ideas that seemed banished to the history books as an unrepeatable nonsense, such as the establishment of multiple exchange rates, different depending on the type of product being traded abroad. Currently only Venezuela, Iraq, Cuba, Ghana and Zimbabwe, in addition to Argentina, use them, and the mere enunciation of the list gives a clue that it must not be a good idea. Curiously, in Spain they were in force from 1943 to 1959 under the Franco regime. The extremes end up getting confused and applying the same policies.
In short, Argentina is, once again, on the brink of bankruptcy. It is not that with eight defaults it is the country in the world with the highest number of bankruptcies in history. That sad record belongs to Spain (with fourteen), but since 1950 the number of defaults in Argentina has risen to six, approximately one every ten years. And in that period only Venezuela equals it, while in Spain the last one occurred in 1882. But don't worry the Argentines, because it looks like Venezuela will return to top that list alone in less than a year again. And the “21st century socialism” of some countries is enormously similar to that of the 19th century, with absolute contempt for the most basic economic theory, and where the prevailing populism has combined the worst of communism and fascism. We will see if these elections open a new era for Argentina and, by the way, for Latin America. To begin with, if they came into office with some basic notions of economics, like Macri, it would come in handy.
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